Entrepreneurs Split on Tax Reform, as Digital Payments and Emerging Tech Poised to Reshape the Small Business Landscape
Local entrepreneurs are increasingly optimistic about the economy, growth and revenue for their businesses when looking toward the future, according to the spring 2018 Bank of America Business Advantage Small Business Owner Report.
The report, based on a semiannual survey of 1,000 small business owners across the country and in the greater San Francisco area, found 59 percent of local entrepreneurs are confident their local economy will improve in 2018, up 10 percentage points from last spring. Similarly, 46 percent of San Francisco small business owners are confident the national economy will improve in 2018, up 2 percentage points from last spring.
Economic confidence and optimism has led to an improved outlook on revenue and long-term growth. Sixty-four percent of entrepreneurs believe their revenue will increase in 2018 (up 7 percentage points year over year), and 63 percent plan to grow their business over the next five years. Additionally, the percentage of those who plan to hire in the year ahead (30 percent) has improved since spring 2017 (26 percent), and is well ahead of the national average (22 percent).
“San Francisco entrepreneurs are feeling optimistic about the current business landscape and expressing more confidence in their plans to expand and grow,” said Emily Shanks, small business northwest division executive at Bank of America. “We believe several factors are contributing to the trend of climbing confidence, including recent changes to the federal tax code and a sense of excitement about new technologies that are allowing business owners to position themselves for growth.”
According to the report, San Francisco small business owners are split when it comes to the new tax code and its impact on small business. Half of San Francisco entrepreneurs cite the new policy as a game-changer for small businesses overall, 8 percentage points lower than the national average. In addition, while 49 percent say it has made them more optimistic about their business outlook, this number trails the national average by 14 percentage points.
Only 39 percent of San Francisco entrepreneurs have altered their business plans for 2018 as a result of the new code. Despite this, 69 percent of San Francisco entrepreneurs expect to receive savings for their business because of the policy, and they plan to use these funds to fuel further growth, including:
Investing back into their business (35 percent).
Looking beyond the new tax policy, San Francisco business owners anticipate some economic challenges in the year ahead. Health care costs remain a top concern (69 percent), while concerns over the strength of the dollar, the stock market and other economic areas have increased since a year ago:
In exploring entrepreneurs’ adoption of emerging technologies, the report found digital payments to be one of the most significant innovations disrupting the small business marketplace. Sixty-five percent of those surveyed predict all payments at small businesses will be digital within the next five years.
The report also found that mobile use is nearly universal among area entrepreneurs, with 93 percent using smartphones and other mobile devices to manage their business, including:
Two decades into the internet era, the role of the business website is less significant, as 64 percent of San Francisco entrepreneurs report having a website. Sixty-three percent of local business owners who have a website say its primary function is to share basic information, while 30 percent primarily use it to drive sales.
Greater reliance on technology can also create challenges for entrepreneurs, as 55 percent believe their business would suffer if the internet crashed for a week, including 40 percent who say they would lose revenue and 33 percent who would lose customers. Ten percent of San Francisco entrepreneurs say they have been impacted by a data breach in the last year.
Although there are some risks with the increasing role of new technologies in business, San Francisco small business owners think the positives far outweigh the negatives, with 83 percent believing their future success is dependent on technology more so than threatened by it (17 percent). In addition, 86 percent make annual investments in technology and 41 percent do so at least once per quarter.
Small business investment in emerging technology is advancing at a rapid pace in San Francisco, with 52 percent of local respondents reporting they currently use or are exploring advanced technologies for their business, specifically:
There is still a lot to learn, they say, about blockchain. Fifty-five percent of San Francisco business owners say they aren’t familiar with distributed ledger technology, and only 16 percent believe it will be relevant to their business in the near future.
GfK Public Communications & Social Science conducted the Bank of America Small Business Owner Report Survey for spring 2018 online between February 12 and March 26, 2018 using a pre-recruited online sample of small business owners. GfK contacted a national sample of 1,031 small business owners in the United States with annual revenue between $100,000 and $4,999,999 and employing between two and 99 employees. In addition, a total of approximately 300 small business owners were also surveyed in each of ten target markets: Atlanta, Boston, Chicago, Dallas, Houston, Los Angeles, Miami, New York, San Francisco and Washington, D.C. The final results were weighted to national benchmark standards for size, revenue and region.
Prior to 2016, previous waves of the Small Business Owner Report Survey were conducted by telephone and while best efforts were made to replicate processes, differences in sample, weighting and method suggests caution when making direct statistical comparisons of the results from pre-2016 and post-2016.
Bank of America is one of the world’s leading financial institutions, serving individual consumers, small and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 47 million consumer and small business relationships with approximately 4,400 retail financial centers, approximately 16,000 ATMs, and award-winning digital banking with approximately 36 million active users, including approximately 25 million mobile users. Bank of America is a global leader in wealth management, corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations across the United States, its territories and more than 35 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.
Reporters May Contact:
Colleen Haggerty, Bank of America